Guest Author

As far as I’ve come with my ability to manage my own finances, I often fall back into the comfort of unmanaged chaos. The comfort comes from the lack of work and the lack of worry, which often win the day over meticulous planning and consideration. I’m cushioned at the moment; I know that I can stop budgeting down to every penny because I’m in a different situation than I was ten years ago. That thinking, in the long term, could get me into trouble.

Old habits can be dangerous, forcing a step or two backwards instead of forwards. There are improper approaches to eliminating those old, bad habits that could make matters worse.

If you find yourself stuck in a financial rut, falling back on bad habits, and repeating negative patterns of behavior, you’re not alone. Although the steps necessary for getting back on track financially are often mentally apparent, it’s difficult to break the shackles of unhealthy financial habits.

You can promise yourself you will make a change, resolving to swap out bad habits for healthy ones, thinking those good intentions will be enough to ensure success. But the wrong approach, just like reluctant dieting, restricts and limits you without making any real changes. You might tell yourself, “I’ll start tomorrow.” And eventually the initial excitement wears off, and you’re no better off than your were before.

Change your context, change your life

Whether you’re on a mission to lose weight, or you’re trying to save an extra $100 a month, the first step to changing any habit is to understand how and why it is happening in the first place. This means understanding the context of your behavior: the environmental, emotional, and situational factors that affect your choices and actions.

Unless you’re a borderline superhuman, sheer willpower alone is usually not enough to re-shape your habits. It is essential to change your context, as well.

For example, if you’re trying to lose weight, taking your lunch breaks with co-workers in the cafeteria is not conducive to developing healthy eating habits. Instead, plan to take a walk around the block during your break. This simple change of environment reinforces the new habits that you are trying to develop.

When we are trying to create new, healthy habits, we need to give ourselves the best possible chance for success. This means limiting negative influences and distractions, and taking it one small step at a time.

Tiny steps to big change

Successfully changing your financial behaviors can be a frustrating, challenging process. Don’t expect to boil the ocean and change your behavior overnight. Go easy on yourself: don’t deprive yourself in hopes to train yourself and wean yourself off of activities you’ve become accustomed to. This type of cold turkey strategy will be difficult to maintain as you go about with your everyday life, since you will be tempted to revert to old patterns if you don’t change your context.

In the immortal words of the great philosopher Aristotle, “We are what we repeatedly do. Excellence, therefore, is not an act, but a habit.” Aristotle knew that with slow, deliberate choices, anything (including excellence!) could be accomplished.

The key to lasting behavior change is developing new tiny habits over time. This approach was developed by Dr. BJ Fogg of Stanford and focuses on easing yourself into change with tiny modifications. To develop tiny habits, follow these simple steps:

1. Choose three new behaviors to develop.

Choose three new behaviors you would like to incorporate into your life, and focus only on those three. They should be behaviors you perform at least once a day and require little effort.

One tiny habit I would like to develop is packing lunch for the office everyday so I spend less money eating out.

2. Pick a trigger.

To successfully develop a tiny habit, you need to pick a trigger that will motivate and remind you to perform your new habit. It will help automate the behavior and encourage you to sustain your habit long term. A trigger should always take place before the new tiny behavior. When choosing the right trigger, it’s critical to think about the right time and place for your new habit.

In the lunch example, I will need a trigger that takes place in my apartment in the morning since that is where I will need to prepare my lunch. So what are the activities I do every morning in my apartment that could be a trigger? Shower, brush my teeth, get dressed, blow dry my hair.

I choose brushing my teeth because my bathroom is next to my kitchen and every morning, after I brush my teeth, I will make my lunch for the day. The trigger of brushing my teeth will help me create the new habit without an explicit reminder or alarm. I will engrain in myself that “after I brush my teeth I will prepare and pack my lunch for the day.”

3. Celebrate success.

One of the most important steps in the behavior modification process is celebrating every little victory. Every time you do your tiny habit, tell yourself how proud you are, physically pat yourself on the pack, or simply smile and revel in your accomplishment. By creating a positive emotional connection to your new habits, you will take greater pleasure in the habit and motivate yourself to stay on track.

Every morning, after I see my prepared lunch on my kitchen table, I will smile to myself and tell myself how great I am. It may seem a bit self-indulgent and silly, but I imagine it will become one of my favorite moments every morning.

Tiny habits can pay off big financially. When I’m able to successfully pack my lunch every morning, I will save an average of $64 a week, totally $256 a month, and a whopping $3,072 a year.

You’ve gotta want it

At the end of the day, the most important thing when swapping out your old habits for new tiny habits is that you need to want it. You need to crave the meaningful positive change that your tiny habits will bring to your life and understand the ways in which your efforts will pay off. So time to understand the connection between your finances and your everyday life. Set simple, attainable goals that are directly related to your financial dreams and life goals. Tying your tiny behaviors to your hopes and dreams is a powerful motivator. Soon you will find yourself developing habits that go beyond your wallet and impact other areas of your life, like your health and your relationships.

We live in a society where money is an unavoidable necessity. The trick to creating a happy, healthy, financial life is to make your money work for your life — and not the other way around.

Julianna Young is Director of Behavior Design at Moven, a mobile-centric banking experience start-up in New York City. Julianna is their insightful human behavior expert, tasked with injecting the human factor into all of Moven’s products and experiences. You can find her writings on her blog Cognitive Play.

Have you ever watched “Storage Wars”? It’s a real-life series on A&E which follows professional buyers as they scour repossessed storage units for treasures. The buyers on the show will bid hundreds of dollars for the lockers without even knowing what’s inside. It’s pretty hit-or-miss. The lucky ones find a treasure trove and cash in on a hefty profit. The not-so-lucky ones usually just end up with a heap of old garbage. In my opinion, the show is completely mind-numbing, but there’s one element that really puzzles me: why the heck are there so many abandoned storage lockers?

It’s not exactly cheap to rent off-site storage. When I was looking up rates for self-storage in metro Detroit, I was blown away by how expensive it is. One storage facility near me sells spaces that range from $50 a month for a 5×5 non-climate-controlled unit to a 1,701-square-foot monstrosity (non-climate controlled) for almost $900 a month! With those kinds of prices, I can’t believe people would store anything for more than a month or two.

Yet, storage facilities have tons of renters who will secure spaces for extended periods of time. Many companies run specials offering “3 free months” or a similar perk for paying in advance for your extended reservation. That’s how they hook you.

Yes, renting self-storage is sometimes a necessity. People who are relocating or downsizing may need to use it for a short period of time. However, it seems that most people who rent storage are doing so because they need a place to store their excess junk. Those storage lockers you see on “Storage Wars” are not usually filled with things people actually need or use; they’re filled with junk, junk and more junk.

Still don’t believe that self-storage units are a bad idea? Here are six reasons (okay, so maybe a few less than a million!) that you should find a different place to store your stuff.

1. You’re spending money to keep things you don’t need. If you don’t touch it for years, chances are you don’t need it. If you’re holding on to things because “they might be valuable one day,” you’re truly fooling yourself. By the time you’ve paid to store it “until it’s valuable,” you won’t be making money on it, since you wasted all that money on storage.

2. Your stored items might be ruined. We’ve already established that storage lockers are expensive.Climate-controlled storage lockers can be even pricier. Do you think a non-climate-controlled environment is the best place to store “valuable” antiques, collectibles, books, and furniture? Probably not. It won’t take long for extreme heat, cold, or humidity to rough up your possessions: you can expect an array of physical damage from warping and cracking to mold and chemical deterioration.

3. Storage fees are financially draining. Expect to pay at least $50 for a small unit. That $50 turns into $600 after one year. It’s $1,200 after two years, and $3,000 after five! Think of all the new things you could buy instead of spending money storing old stuff.

4. Having extra storage allows you to buy more stuff. People find it necessary to rent storage lockers because they don’t have enough room at home to store their belongings. Storage units can be an enabler for hoarders since they prevent people from ever having to throw anything out. Storing belongings offsite allows you more room in your house to acquire stuff you probably don’t need. If you truly need extra storage space, take all that money you’re spending on storage, and invest it in a bigger house! If you disagree, check out this eye-opening article from Wise Bread.

5. It might get stolen. If it doesn’t get ruined by weather, it might just get stolen. Storage facilities don’t always have security personnel on hand, and depending on the construction of your storage unit, breaking in might not be that hard.

6. Unpaid bills = repossessed storage unit. Let’s turn to that question I had earlier: why are there so many abandoned storage units? After doing a little bit of digging, I found that each state has different requirements for dealing with abandoned storage lockers. In California, for example, tenants must be given at least 15 days to reclaim “abandoned” property. Only after the rental facility has given the tenant adequate time to retrieve the items can they put the items up for sale. It’s important to consider that there are many unfortunate circumstances which can easily lead to unpaid bills, and therefore, cause your items to be sold without your knowledge. If you become severely ill, for instance, you might not be able to get your stuff out before it’s too late. If you pass away, your loved ones may not even find out about the locker before the items are sold. Long story short: you don’t have the same level of control over your possessions as you would if you stored them at home.

My best advice to those of you that rent storage lockers is to get out now! There might be some unique instances in which self-storage is a good idea, but for the average American, it’s just more money you’re sending down the drain. Evaluate your own circumstances and determine if self-storage is really a smart financial decision for you.

This is a guest post from Michael Maye at our partner site TheStreet.com

By Michael Maye

Individuals looking for a simple and effective way to reduce their future taxable estate should consider the annual gift exclusion.

What is the annual gift exclusion and how does it work? Every U.S. citizen is allowed to give anyone $13,000 (2012 level) a year without incurring either a gift tax liability or gift tax reporting. Married couples are allowed a further benefit, which allows them to split their gifts. In essence, a married couple can give any individual up to $26,000 per year. Married couples who make split gifts do have a reporting requirement. They must file IRS Form 709 on which they report their split gift.

The humble annual gift exclusion can be an effective way to transfer wealth without using any of an individual’s lifetime gift exclusion or estate exemption (both currently $5.12 million in 2012).

Another advantage of using the annual gift exemption is the sheer simplicity:

· No giving up control of a large portion of your assets

· No administrative costs i.e. trust tax returns/legal set up costs

· Only need to file gift tax return if married couple making split gift

· Control over how much to gift each year

· Control over who to gift to each year

· No requirement to a make gift every year

So how effective can annual gifts be in transferring wealth? Let’s take a hypothetical family with a married older couple and three adult children, all whom are married. The couple has a $5 million investment portfolio invested in municipal bonds yielding 3 percent per year. The older married couple could gift $156,000 per year using gift splitting. The math is simply six individuals x $26,000 (split gift). The older couple in this case would need to report these gifts on Form 709 but would use zero of their lifetime gift exclusion and estate exemption.

Over time they can continue making or not making the annual gifts as their economic circumstances dictate. If the couple continued making the $156,000 a year in gifts after 15 years they will have transferred $2.3 million. The size of their estate would be further reduced by the earnings foregone by making the annual gifts.

If the older couple had not pursued the gifting strategy and the $5 million portfolio would have generated an incremental $600,000 over those 15 years. So in this example the total amount of wealth transferred would be $2.9 million. The couple’s investment portfolio after 15 years with the gifting strategy would be $4.9 million vs. almost $7.8 million without a gifting strategy. That represents a 38 percent reduction.

Why should a couple with a $7.8 million estate worry if the current federal exemption is $5.12 million a person? The current federal estate exemption is slated to fall back to $1 million in 2013. Another consideration is the state estate tax. Many states have a much lower estate tax exemption amount than the federal exemption amount. For example, New Jersey’s exemption is only $675,000.

What are the potential issues with an annual gifting strategy? One possible drawback is the person you are making a gift to is incapable of managing their financial affairs. In this case you may want to use a trust to protect them from themselves or creditors. Also, this strategy does not make sense for anyone with a special-needs child. Gifting them money outright may jeopardize their governmental benefits. In this case the correct way to give to them would be via a special-needs trust. Finally, a potential issue is if the older couple had a shorter than expected life expectancy that would diminish the amount given. However, the couple’s untimely death would be somewhat offset by less growth in their investments.

The annual gift is a humble but effective solution to wealth transfer. For those of you with larger estates it can still be an effective tool in your estate planning toolbox.

Maye is the founder and president of MJM Financial Advisors (www.mjmfinadv.com), a registered investment advisory firm in Berkeley Heights, N.J. He is a member of the National Association of Personal Financial Advisors (NAPFA) and has been a speaker covering tax topics at NAPFA’s national and regional conferences. Maye has also been a frequent contributor to the Star Ledger of New Jersey’s “Biz Brain” and “Get With the Plan” articles. In addition to NAPFA, he is a member of Financial Planning Association, American Institute of Certified Public Accountants, New Jersey State Society of CPAs and the Estate Planning Council of Northern New Jersey.

Airfare certainly isn’t cheap. According to a report from the Federal Aviation Administration, increased demand, coupled with major airline mergers, will lead to higher tickets prices through 2012 and beyond.

To help you counteract the effects of these external factors, here are some surefire ways to skirt fees, find deals and score discounts so you don’t wind up paying top dollar:

Join a frequent-flier club. “Sign up for a frequent-flier program if your airline of choice offers one,” says Andrew Schrage, co-owner of Money Crashers Personal Finance. These programs allow you to accrue miles against your flights that can be put toward future purchases.

If you’re able to qualify for the club’s elite status, which typically involves flying more than 25,000 miles a year, you may also be entitled to waived baggage fees, priority boarding, bonus miles, exclusive discounts and preferred seating or upgrades.

Get a co-branded credit card. If you don’t fly frequently enough to join your favorite airline’s club, you could, instead, opt for its co-branded credit card.

“The airline credit cards are a great option” for those who frequent a single airline, live by a hub city or fly four or five times a year, since they help you earn miles towards future travel, Counter says. Some of the best products also allow cardholders to skirt baggage fees.

Additionally, “if you’re disciplined enough not to overspend, watch for travel credit cards with ridiculous deals attached,” says Donna Freedman, a Savings.com DealPro who also runs the blog Surviving and Thriving. But don’t overdo it: Opening too many credit cards in a short time can do some damage to your credit score.

Compare apples to apples. Thanks to the fee boom, “a base fare is no longer the true measuring stick of the cost of your flight,” says Jami Counter, director of flights for travel review site TripAdvisor. As such, you have to make sure you’re considering all fees and surcharges when researching cheap airfare for your summer vacation.

TripAdvisor has a fee estimator that can be helpful in determining the true cost of a flight available on its website. It can be helpful in assessing baggage fees, meals and other in-flight services on domestic travel.

Fly a low-fee carrier. Keep in mind, there are still a few low-cost carriers. These carriers may be an ideal option for no-frills travelers who don’t have a lot of time to research flights.

“Fly on JetBlue and you’ll avoid paying for the first checked bag,” says George Hobica, an airline expert and founder of AirfareWatchdog.com. Southwest Airlines won’t charge you for a first and second checked bag if they don’t weigh over 50 pounds. The carrier is also a great option for anyone looking to avoid ticket change fees.

Don’t try to break the rules. While frustration with fees certainly may inspire rule-breaking, your bad behavior is likely going to cost you.

“Baggage fees have plateaued,” Counter says, which has made carriers all the more aware of the ways customers try to get around them. For instance, trying to cram too much into a single bag so you can avoid paying to check a second one is likely to lead to an oversized luggage fee, which tends to be higher than the one you were hoping to avoid.

Delta, for instance, charges $35 to check a second bag on a domestic flight, but $90 to check a bag that exceeds weight limitations. As such, you’re better off making sure your bag meets the airline’s requirement or resolving yourself to the fact that you’ll need to pack another one.

Pack light. To avoid getting dinged by the high fee for oversized baggage, it’s important to research flight requirements. A good rule of thumb is to weigh your suitcase before heading to the airport to ensure it doesn’t weigh more than 50 pounds, a common weight limit among carriers.

“I always leave room in my carry-on [when checking a bag] in case I’m overweight, so I can take stuff out,” says Andrea Woroch, a consumer savings expert at Kinoli, a network of personal finance websites. You can also consider flying with only a carry-on to avoid the extra charge.

Ship your luggage. You might also want to look into shipping your bag via UPS or FedEx to your destination instead of paying for it at airport check-in.

“In certain circumstances, it can be more affordable,” Counter says. These circumstances typically include particularly heavy or oversized pieces of luggage. It also helps if you’re able to send bags a few days ahead of your trip to avoid the high price of overnight shipping.

You can check out Hobica’s breakdown on shipping bags with delivery services versus checking them with the airport to get an idea of how and when this option can save you.

Avoid amenities … Keep in mind, every amenity you ask for probably has a price attached, so frugal fliers will want to keep requests down to a minimum.

You may also want to consider alternatives. For instance, Woroch suggests bringing along a portable DVD player and free library DVD rentals as a substitute for the in-flight movie. You can also eat before heading to the airport and pack a few snacks to get you through the flight.

… and common fee traps. While you probably know in-flight entertainment or sustenance will cost you, there are several other conveniences for which charges may not be so obvious.

For instance, “never book your travel over the phone, as some airlines charge as much as $25 for this,” Schrage says. You also may want to refrain from checking a bag curbside; this sometimes features a $2 up-charge.

Additionally, Hobica says consumers shouldn’t get so hung up on seat assignments.

“Don’t be coerced into paying for a seat,” he says. “You’ll get a seat eventually. If you’re traveling with a small child or someone with special needs and really need to sit together, call the airline directly and explain the situation.”

Fly at the right time. Finally, it pays to plan ahead. Flight prices are largely affected by demand, so certain days and times are more likely to carry lower fares. You can find out which dates are the most affordable in our roundup of the cheapest weekends to travel in 2012.

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About Luke Landes

Luke Landes founded Consumerism Commentary in 2003 and has been building online communities since 1990. Luke has contributed to PC World Magazine, US News, Forbes, and other publications. Read more about Luke and about Consumerism Commentary.

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